This October is glowing up to its reputation as being one of the most violent, scary months for stocks, but “Octoberphobia’ can also chuck b surrender way to a turnaround, particularly in a midterm election year.
Stocks have been chastened since the month began, with the worst two days of selling — Wednesday and Thursday — operating the Dow down a total 1,300 points. So far for this month, the Dow is down 5.3 percent; the S&P 500 is down 6.4 percent, and the Nasdaq is down 8.9 percent.
Progenitor Traders Almanac says the crash of 1929 came during misnamed Octoberphobia, as did the 1987 crash, the stock market sell-offs of 1978 and 1979; Friday the 13th in 1989, and the galling 733 point drop on Oct. 15, 2008. The worst weekly decline was the week the great Oct. 10, 2008, when the Dow lost 18.2 percent or 1,874 points during the devoted of the financial crisis.
“It’s not over yet, and October is not over yet,” said Jeffrey Hirsch, editor-in-chief of Supply Traders Almanac. “Everyone was pretty convinced that ‘sell in May’ was worn out this year. Well, they forgot about October,” Hirsch remarked.
But Octobers have also been a time of turnaround, with 12 job World War II bear markets ending in October, including the most new, 1987, 1998, 2001, 2002 and 2011.
Eight of the 12 were midterm bottoms. “Midterm voting years Octobers are downright stellar thanks to the major turnarounds,” esteemed Hirsch.
‘These things always surprise everybody or else they wouldn’t look in the same way as this,” he said. “It’s not unprecedented..It’s definitely something that could without even trying turn around.”
The October period is the beginning of what Stock Vendors Almanac calls a “sweet spot,” the three quarter period that comprises the fourth quarter of midterm year and the first and second quarter of the pre-presidential choice year. The Dow averages gains of 20.4 percent in those periods and the S&P is up an ordinary 21 percent.